US Household Wealth Hits Record $130 Trillion As "Top 1%" Have Never Been Richer While Poor Drown In Debt

The Fed's latest Flow of Funds report released at noon today showed the latest snapshot of the US "household" sector as of Dec 31, 2020, which confirmed that not long after the biggest drop in household net worth on record when $8 trillion was wiped out in Q1, 2020, in the 4th quarter of 2020, the net worth of US households soared by $6.93 trillion - the second-biggest quarterly increase in history - to a record $130.2 trillion.

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As usual, the biggest swing factor was in the value of market-linked securities: in Q4, the value of directly and indirectly held corporate equities increased by $4.881 trillion due to the continued surge in stock prices (after the record $5.95 trillion increase in Q2) to a record $39.8 trillion, while the value of real estate held by households by a far more modest $800 billion. The high rate of personal saving also contributed to the increase in net worth, while the value of real estate held by households increased modestly.

As a percentage of Disposable Personal Income, total assets also hit a new all-time high of 853% of DPI, while net worth was 754% of disposable income, also a record high.

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Real estate ($32.0 trillion) and directly and indirectly held corporate equities ($39.8 trillion) were among the largest components of household net worth. Homeowners’ real estate holdings minus the change in mortgage debt rose $654.5 billion (a positive value indicates that the value of real estate is growing at a faster pace than household mortgage debt). Finally, owners’ equity as a percentage of total real estate value rose to 65.87% to a level of $21.103 trillion

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On the liabilities side, total credit rose from $16.37 trillion to $16.64 trillion.

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Household debt grew by 6.5% in the fourth quarter of 2020. Home mortgages increased by 5.2%, after growing by 5.7% in the third quarter. Nonmortgage consumer credit increased at a more moderate 2.3% pace, about the same pace as in the third quarter. The increase in consumer credit reflects growth in auto loans and student loans, while credit card balances continued to decline. Alarming growth in margin debt also boosted household debt growth over the second half of 2020.

Nonfinancial business debt edged up at a modest rate of 0.8%, reflecting increases in corporate bonds outstanding and declines in nonmortgage depository loans. Federal debt rose 10.9%. State and local debt increased 1.7%.

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